By Joshua Burd
Warehouse vacancy in New Jersey ticked upward to start the year, but remains tight by national standards, as the market continued its return to equilibrium after record demand.
A new report by NAI James E. Hanson said as much, citing a pullback in leasing activity along with new inventory that came online in the first quarter of 2024. Those trends came alongside moderating rent growth across 14 submarkets tracked by the Teterboro-based firm, even as rates in some top-tier locations reached the high teens or above $20 per square foot.
“After experiencing nearly three years of unprecedented demand, historically low vacancy rates, rising rents and extraordinary levels of new construction, the New Jersey industrial market has begun to ‘normalize,’” James Delmonte, vice president and director of research for NAI Hanson, wrote in the report. “Rising vacancy rates have come amid new construction deliveries and tempered demand as average asking rents increased at a more measured pace.”
According to the report, the largest lease of Q1 was a 667,560-square-foot deal at 1900 River Road in Burlington Township. The commitment by Lecangs, a maker of ergonomic workspace equipment, has filled one of two speculative buildings at a 1.5 million-square-foot development by MRP Industrial and Clarion Partners, where JLL served as the leasing agent.
For the broader New Jersey industrial market, overall vacancy rose in Q1 to 5 percent from 4.7 percent at the end of 2023 and from 2.4 percent at the same time last year. NAI Hanson noted that the uptick stems from the delivery of 4.6 million square feet of new industrial space during the quarter, of which 69 percent of space is available.
The firm added that, despite the increase in supply, New Jersey is one of the tightest industrial markets in the country. Vacancy rates within the 14 submarkets range from a high of 9.7 percent in the New Brunswick/Exit 9 region to a low of 2.9 percent at Exit 8A.
Meantime, average asking rates rose only 1.4 percent from the same time last year, NAI Hanson wrote, a far cry from the nearly 20 percent surge between early 2022 and early 2023. Asking rates in all 14 submarkets tracked by the firm have risen slightly or remained stable over the last 12 months, with the Port, Exits 10/12 and Meadowlands regions leading the way with rates eclipsing $16 per square foot.
The report noted that average asking rates remain above $14 per square foot for the overall market, but pointed to completed deals in newer properties where starting rents are north of $17. That includes the Port and Meadowlands regions, where starting rents for several deals have reached over $20 per square foot.
